Wireless Spectrum Auction: 60 Per Cent Reserved For New Carriers

VANCOUVER - The federal government confirmed Thursday that a forthcoming wireless auction will reserve more than half of the new spectrum for carriers other than the Big Three.

Industry Minister James Moore released the details for the auction of AWS-3 spectrum, or advanced wireless services, which is scheduled to begin March 3. The final technical document largely mirrored what the government had already foreshadowed during consultations.

Most notably, 60 per cent of the available spectrum will be reserved for smaller carriers, while the remaining 40 per cent will be available to all applicants.

Moore lauded Canada's three major carriers for providing world-class service, but he said consumers need more competition.

"They (Bell, Rogers and Telus) are all some of the best wireless companies that exist anywhere on the globe," Moore said at an event in Vancouver.

"But while we put more spectrum in the marketplace than ever before, we have a coherent and consistent policy to ensure we reserve more capacity for more competition in the wireless marketplace, which of course will result in lower prices and a better quality of services for Canadian consumers."

The government has been attempting to use its wireless auctions to foster competition, but new entrants have struggled and the three national carriers continue to represent 90 per cent of Canada's wireless customer base.

Moore confirmed the AWS-3 auction will maintain the same opening bid prices that were announced earlier this year. Industry Canada says it would raise $162.45 million from the auction if it receives just the minimum bid for each parcel of wireless spectrum.

The minister also used Thursday's announcement to reveal several other measures intended to increase capacity, including a contentious plan to allow mobile service on a band currently used by rural wireless Internet service.

Consultations on a proposal to shift 3,500 MHz spectrum to mobile service attracted submissions from about 150 communities over concerns rural residents could lose their Internet service.

Moore said the government would ensure that doesn't happen.

"We have worked closely with the Federation of Canadian Municipalities and with rural municipal associations to ensure ... we can have expanded wireless access while protecting all existing Internet service provides in rural Canada," said Moore.

The government also plans to hold consultations to allow mobile service on the 600 MHz band, which currently carries over-the-air television service.

Moore said six to seven per cent of Canadians still watch television this way, and again, he promised their service would not be affected.

Telecom industry analyst Mark Goldberg said the opening bid prices for the AWS-3 auction are lower than prices for similar spectrum in the United States, and he said it's possible licences won't fetch much more than the minimum bid.

"It may be leaving an awful lot of money on the table," Goldberg said in an interview. "Conversely, the prices that carriers pay for spectrum ultimately get recovered somehow. It's reflected in the rates."

At the same time, Goldberg said he's skeptical that adding new carriers will result in dramatically lower prices for Canadian consumers.

Newer operations will require significant investment in infrastructure to compete, he said.

"You'll have natural price competition, but I don't think people should be looking for prices to drop 50 per cent as a result of any of the moves that we've seen," said Goldberg.

The AWS-3 auction will happen just a month before the government holds an auction for licences on the 2,500 MHz spectrum.

Earlier this year, the government held an auction of prime 700 MHz spectrum, which raised a record $5.27 billion.

However, Rogers Communications (TSX:RCI.B), BCE Inc. (TSX:BCE) and Telus (TSX:T) bought the bulk of the available licences, with regional players also making smaller acquisitions.

Wind Mobile, which is attempting to position itself to become a fourth national carrier, was unable to bid because it couldn't secure funding.

Wind's CEO has said the company's next step is to acquire more wireless spectrum, either by buying it from other carriers or through next year's auctions.